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About Settling Trades In Three Days: Introducing
T+3
(Source: U.S. Securities and Exchange
Commission)
"Why
the change?"
"What security transactions are covered?"
"When I buy a security, how do I make sure my payment reaches my
broker in three days?" (Member
section)
"How do I calculate when the three-day settlement cycle begins and
ends?" (Member
section)
"Will there be a penalty if my payment does not arrive at the brokerage
firm within three days?" (Member
section)
"When I sell or buy a security, will I receive funds or my security
certificate from my brokerage firm within three days?" (Member
section)
"Will I be able to review a confirmation slip before I pay for my
purchase?" (Member
section)
"What should I do if my confirmation slip or account statement reflects
purchases or sales that I did not authorize or at a price I did not agree
to?" (Member
section)
Who Should "Hold" Your Securities? You? (Member
section)
Your Brokerage Firm? Or the Company in Which (Member
section)
You've Invested? (Member section)
"What if the brokerage firm holding my cash or securities goes bankrupt
or loses its records?" (Member
section)
Beginning on June 7, 1995, investors must
settle their security transactions in three business days rather than
five. This shortened settlement cycle is known as "T+3" - shorthand
for "trade date plus three days."
This new rule means that when you buy
securities, your payment must be received by your brokerage firm no later
than three business days after the trade is executed. And if you sell
securities, your brokerage firm must receive your securities certificate
no later than three business days after you authorized the sale.
The U.S. Securities and Exchange Commission
developed this brochure to address frequently asked questions about why
the settlement cycle was shortened and to highlight issues you should
consider in preparing for three-day settlement.
"Why
the change?"
Unsettled trades pose risks to our financial markets, especially when
market prices plunge and trading volumes soar. This happened when the
stock market fell by over 500 points on October 19, 1987. In the hours
and days following this drop, our financial markets were threatened by
doubts about whether securities firms and investors hit by sizable losses
would be able to pay for their transactions. By reducing the settlement
cycle from five to three business days, the SEC has lessened the amount
of money that needs to be collected at any one time, and strengthened
our financial markets for times of stress.
"What
security transactions are covered?"
Most security transactions, including stocks, bonds, municipal securities,
mutual funds traded through a broker, and limited partnerships that trade
on an exchange, must settle in three days. Government securities and options
will continue to settle as they have in the past - one day following a
purchase or sale.
Getting Your Money In On Time
"When
I buy a security, how do I make sure my payment reaches my broker in three
days?"
You should talk with your broker or banker about ......................
More
information is provided in the Member Area
Recommended further reading:
What
are investment advisers?
Internet Fraud: How to avoid Internet
investment scams
Tips for online investing: What you
need to know about trading in fast-moving markets
Trade Execution: What every investor should
know
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